Why Buhari Reappointed Emefiele As CBN Governor

President Muhammadu Buhari has reappointed Godwin Emefiele as the governor of the Central Bank of Nigeria (CBN) and asked the Senate to confirm him.

By the reappointment, which came after wild speculations, he has become the first governor of the apex bank to get a two-term mandate since the return to civil rule in 1999. He was appointed in 2014 by former President Goodluck Jonathan.

In a letter read on the floor of the Senate yesterday by the Senate President, Bukola Saraki, Buhari noted that having completed his first term in office, Emefiele has been nominated for confirmation of the Senate for a second term. He urged the Senate to give expedited consideration to the confirmation of Emefiele’s nomination.

In line with the Senate’s standing rule, the president’s request would be referred in the next legislative day to the Senate Committee on Banking, Insurance and Other Financial Institutions for legislative processing. The committee’s main task is to subject Emefiele’s credentials to serious scrutiny.

It will equally consider any petitions that it might have received against the nomination and if there is none, the nomination is approved by the committee and a report is accordingly submitted to the Senate for final approval and confirmation.

The extension of the CBN governor’s tenure is believed to be due to his giant strides in office, and may well be President Buhari’s first official admission, albeit tacitly, of inheriting something good from his predecessor, Jonathan.

In fact, Emefiele’s austere nature and ability to instill financial discipline in the banking sector, which significantly reduced rascality and frivolity in loan approvals, may have resonated with Buhari, whose body language cuts a similar posture.

The 57-year-old banker was the Group Managing Director of Zenith Bank Plc prior to his appointment in 2014, with a huge task to stabilise an economy that went awry since 2015.

Since mid-2014, when he took over the reins of CBN, Nigeria has experienced stable economic monetary policies, even as it did not witness any crude oil windfall, which is the backbone of the economy, in terms of revenue supply.

Conversely, the oil price volatility impacted not only the country’s revenue base, but the inflow of foreign exchange (forex), stoking currency depreciation, system arbitrage and consequent policy measures, leading to calls for the devaluation of the naira.

The CBN governor’s ability to hold on to his belief in the economy and not allow the ship sink on his watch, may have also earned him the second term, which many of his peers say is well deserved.

Many may not have thought about the significance of Emefiele’s appointment or the fact that he is the 12th CBN governor.

Emefiele, through his monetary policies and even interventions in fiscal issues over the past five years, has insisted that the country still holds a high return on investment, with huge opportunities given its over 200-million-people market.

Therefore, with a cocktail of policy measures, the naira, which fell to N520/$1 in 2017 at the open market, is now stabilised around N360$1 in the past two years, and stayed through to the period of the general elections.

Specifically, Emefiele oversaw Nigeria’s widely acclaimed response to plummeting oil prices, a spiralling inflation, significant exchange rate pressures, sharp fall in forex inflows, delisting of Nigeria from the JP Morgan Bond Index, normalisation of U.S. monetary policy, geopolitical tensions amongst global superpowers, and overall uncertainty after the change of administration in 2015.

Indeed, the stability he brought into the system has been attributed to his innovative Investors and Exporters Window worth $25 billion, which liberalised official transactions of forex, as well as directive to banks to sell forex to customers over the counter for basic travel allowance (BTA) and medical and education bills.

Beyond forex stability, which saw massive accretion in Nigeria’s foreign exchange reserves from about $23 billion in October 2016 to nearly $48 billion in June 2018, Emefiele’s policies also significantly helped Nigeria achieve fast recovery from recession, which was caused by sharp and sustained oil price declines from 2015 through 2017.

In contrast, Nigeria’s peers are still struggling, with South Africa basically still in recession, while Egypt had to resort to a $12-billion IMF loan.

Also, Emefiele has recorded the longest month by month decline in inflation from about 19 per cent in January 2017 to about 11 per cent in July 2018, while also helping to avert a major economic crisis with labour groups by innovatively offsetting billions of arrears in salaries, pensions and gratuities.

Furthermore, under Emefiele, the country has witnessed a sharp drop in its import bill, which fell from $665 million to $160 million, thereby restoring its current account to a surplus.

Even in the area of fiscal interventions, the CBN governor sustained large-scale financing of agriculture through the Anchor Borrowers’ Programme, which has disbursed hundreds of billions of naira in small loans to hundreds of thousands of peasant farmers, thereby creating millions of jobs across the country.

As an evidence of the new discipline through tight monetary policies, his tenure has witnessed unprecedented profits in the banking industry, with GT Bank and Zenith Bank leading the way with record performances. Operational discipline also accounts for significant reduction in bad loans, thereby leading to massive expansion of banking services with financial inclusion rate reaching nearly 64 per cent in 2018, up from only 32 per cent in 2012.

With all these, Emefiele succeeded in facilitating major improvement in Nigeria’s ranking on the World Bank’s Doing Business Indicators, through the creation of the collateral registry and credit reference bureaus.

The Group Managing Director and Chief Executive Officer (CEO) of the UBA Group, Mr. Kenneth Uzoka, told The Guardian in a telephone interview that the CBN boss had done very well and deserved a second term. “We need sustainability in the financial system, which is what he represents at this time.”

Other bank chief executives who spoke with The Guardian corroborated Uzoka’s position. The Managing Director, Wema Bank Plc, Mr. Ademola Adebise, said: “His reappointment is a welcome development, and there will be continued and sustained stability in the economy. Through this stability, investors will be able to understand our economic policies better and be able to make informed business decisions.”

Former managing director of the defunct Diamond Bank, Uzoma Dozie, said: “Emefiele’s retention means there will be consistency and stability in monetary policies. Also, the market will be stable as a change would have created uncertainty and instability.”

The real sector operators, like the Manufacturers Association of Nigeria (MAN), believe the reappointment is an opportunity to right the wrongs in some policies that adversely affected economic activities.

A former president of MAN, Mr. Frank Jacobs, told The Guardian that the association “is still not happy with Emefiele’s tight monetary policy, where interest rate has remained very high.”

Under the new tenure, Jacobs expects “more liberalised and flexible interest rate, because at 14 percent, this is not really good for an economy that is still recovering from recession.

“Therefore, he should try something less inflationary in the range of below 10 percent to enable banks to lend more to manufacturers at below 10 percent. Although, we are pressing for five percent special rate, but not all the real sector operators have got this.”

Despite the real sector’s misgivings, the Chairman, Association of Securities Dealing Houses of Nigeria, Pat Ezeagu, said Emefiele’s re-nomination affirmed his popularity and prominence in engagements that concern the economy.

“At a point, everyone only knows Emefiele because he is the only prominent figure in the administration when it comes to the economy.

“The market has become used to his policy and person, but we want him to advise government on the debt strategy and its costs to the economy. We also want him to advise government on the use of capital for infrastructure financing and transparent sale of national assets,” he said.

Even from the capital market perspective, the President, New Dimension Shareholders Association, Patrick Ajudua, said not only would Emefiele’s reappointment promote policy consistency and continuity, it would also enable him to consolidate on his performance, especially in the area of ban on the importation of items that can be produced in Nigeria, to boost local manufacturing.

Also, the Publicity Secretary, Independence Shareholders Association of Nigeria, Moses Igbrude, want Emefiele to use this tenure to, “strengthen restrictions on imported items, especially agricultural products, to encourage local production of those items being produced in Nigeria.

“He should try his best to reduce inflation further. He should develop strategies to make loans accessible to SMEs at reduced rates. He should also strengthen the consumers’ complaints department to effectively and efficiently address issues in the banking sector like the e-payment system, to check the rising incidence of fraud.”